The ERCOT Grid and Beyond Joel Mickey Senior Director, Market Design & Operations UEDA Winter Forum Fort Worth March 13, 2019
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The ERCOT Grid
and Beyond
Joel Mickey Senior Director, Market Design & Operations
UEDA Winter Forum
Fort Worth
March 13, 2019
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The ERCOT Region
2
The interconnected electrical system serving most of Texas, with limited external connections
• 90% of Texas electric load; 75% of Texas land
• 73,473 MW peak, July 19, 2018
• More than 46,500 miles of transmission lines
• 600+ generation units
ERCOT connections to other grids are limited to ~1,250 MW of direct current (DC) ties, which allow control over flow of electricity
600 MW with SPP
30 MW with CENACE
at Eagle Pass
100 MW with CENACE
at Laredo 300 MW with CENACE at McAllen
220 MW with SPP
Texas RE
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What is ERCOT?
The Texas Legislature
restructured the Texas electric
market in 1999 and assigned
ERCOT four primary
responsibilities:
• System reliability
• Competitive wholesale
market
• Open access to
transmission
• Competitive retail market
ERCOT is a nonprofit organization that is regulated by the Public Utility Commission of
Texas, with oversight by the Texas Legislature.
ERCOT is not a market participant and does not own generation or transmission/distribution
wires.
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Texas Competitive Model
4
• Generating units are owned by
privately owned companies
o Except for municipal and
cooperative units
• Compete in ERCOT market to
serve load
o Market is overseen by
PUC.
• Transmission and
distribution lines and related
facilities are owned and
operated by regulated
utilities.
oUtilities are regulated by
PUC.
• Retailers compete to serve
consumers’ electric load in
~75% of state
o Except 25% in municipal
and cooperative utility
areas
• Active retail competition
• 92% have switched
• ~15% switches in a year
• Nearly 100% smart meters
The Texas Legislature restructured the Texas electric market in 1999:
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73%
27%
2 models within ERCOT
Non-Opt in Entities
(NOIEs) are still
vertically integrated
Many have existing
and developing smart
grid initiatives:
-- AMI
-- Smart thermostats
-- Demand response
Possible triggers:
Demand charge
avoidance, real-time
prices, congestion
management
‘Utility’ a mostly
obsolete term
Dozens of REPs
competing for
residential and
commercial accounts
Terms typically range
from 3-24 months
Some pre-paid,
renewable options
>99% advanced
metering
Competitive Choice Municipals & Cooperatives (NOIEs)
Share of total ERCOT Load
The two worlds have very
different smart grid incentives
5
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Power Supply (Generation) Must Match Load (Demand)
6
• The fundamental concept behind ERCOT operations is that
generation has to match load at all times.
• In other words, a 1 MW reduction in load has the same effect on the
grid as a 1 MW increase in generation.
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Energy Market
• Market participants bring generation on-line; ERCOT may start additional
generation needed to maintain reliability.
• Market participants submit offers for generation output.
• ERCOT clears the market every five
minutes, using the generation with
the lowest bids to serve the load,
subject to transmission constraints.
• Prices received by generators
signal whether more or less
output is needed from generators
in that area at that time.
• In general, the set of generator
output levels produced by this
process is the lowest cost way that
doesn’t overload the transmission system
to meet the system load for each five minute interval.
7
• Market participants bring generation on-line; ERCOT may start additional
generation needed to maintain reliability.
• Market participants submit offers for generation output.
• ERCOT clears the market every five
minutes, using the generation with
the lowest bids to serve the load,
subject to transmission constraints.
• Prices received by generators
signal whether more or less
output is needed from generators
in that area at that time.
• In general, the set of generator
output levels produced by this
process is the lowest cost way that
doesn’t overload the transmission system
to meet the system load for each five minute interval. -$250 $9,000
Prices
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Nodal Energy Market
• ERCOT clears the real-time energy market every five minutes,
dispatching generation with the lowest offers to serve the load,
subject to transmission constraints
• Locational marginal prices (LMPs) are
produced every ≤5 minutes at >11,000 nodes,
including >600 Generation Resource Nodes
• If there is no congestion on the
system, all LMPs will be equal
(set by the marginal unit)
• Generators are paid the LMP at
their specific Resource Node
• Load Serving Entities are
billed the weighted-average
price at the Load Zone
8
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Energy-Only Market & Scarcity Pricing Mechanism
• Features of the Energy-Only Market Design:
– No forward capacity market
• Energy and AS revenues are the incentives for future investment
– System-Wide Offer Cap of $9,000/MWh
• Highest in northern hemisphere
• Applies to energy and Ancillary Service offers
• Energy market cleared at the SWCAP for two 5-minute intervals in
Spring of 2018
– Operating Reserve Demand Curve
• Assigns values to reserve capacity based on Loss of Load Probability
• System-wide Price Adders increase as reserves decline
9
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Peaker Net Margin (PNM)
Source: Potomac Economics (ERCOT Independent Market Monitor) 2017 State of the Market Report
• The PNM is a calculation
designed to measure the
annual net revenue of a
hypothetical peaking unit
• If the PNM for a year
reaches a cumulative
total of $315,000, the
system-wide offer cap is
then reduced to the
higher of $2,000 per
MWh or 50 times the
daily natural gas price
index
• This threshold (defined in
PUC Subst. Rule
§25.505) has never been
met
2018 PNM
= $62,293
10
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Real-Time Energy Prices 2016-2018
11
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1 11/1 12/1 1/1
$/M
Wh
2016 SPP 2017 SPP 2018 SPP
Prices exceeded $75/MWh in
1.6% of intervals over 3 years
Intervals 2016 2017 2018
<$0 569 235 160
$0-$30 31,562 30,568 27,446
>$30-$75 2,605 3,685 6,691
>$75 400 552 743
HUB Avg. 15-min. Settlement Point Prices
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Current Records
1
2
Peak Demand Record: 73,473 megawatts (MW)
July 19, 2018, 4-5 p.m.
Weekend Peak Demand Record: 71,445 MW
Sunday, July 22, 2018, 5-6 p.m.
Winter Peak Demand Record: 65,915 MW
Jan. 17, 2018, 7-8 a.m.
Wind Generation Records (instantaneous)
Output: 19,672 MW
‒ Jan. 21, 2019, 7:19 p.m.
Penetration (load served): 56.16%
‒ January 19, 2019, 3:10 a.m.
‒ Total MW Served by Wind = 17,406 MW
Recent Monthly Peak Demand Records
2018 • January: 65,915 MW (Jan. 17, 7-8 a.m.)
• May: 67,265 MW (May 29, 4-5 p.m.)
• June: 69,123 MW (June 27, 4-5 p.m.)
• July: 73,473 MW (July 19, 4-5 p.m.)
• November: 56,247 MW (Nov. 14, 7-8 a.m.)
2017
• April: 53,486 MW (April 28, 4-5 p.m.)
• October: 62,333 MW (Oct. 9, 4-5 p.m.)
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Annual Energy and Peak Demand (2008-2018)
13
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13.3%
23.0%
26.0%
42.6%
32.5%
13.6%
14.8%
12.6%
16.5%
20.1%
17.1% 17.5%
14.3% 13.8% 14.3%
17.0%
18.2% 18.9%
11.0%
8.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pla
nn
ing R
ese
rve
Marg
in (
%)
Historic Summer Reserve Margins (May CDR Reports)
14
December 2018 update: 8.1%
Since release of the Dec. update,
unofficially revised to 7.4%
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0
20,000
40,000
60,000
80,000
100,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Nuclear Coal Other Gas CC Gas Steam Gas CT/IC Wind Solar
ERCOT Installed Capacity (1999-2018)
15
Wind and solar values are based on nameplate
capacity (not adjusted for peak capacity contribution)
4.8%
51.6%
0.3%
35.4%
12.1%
21.4%
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-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
MW
h
Nuclear Coal Other Natural Gas Water Net DC/BLT Wind Solar
Energy Fuel Mix 2003-2018
16
*Source: Historical ERCOT Demand and Energy Reports
8.5
%
9.2
%
9.9
%
10
.6%
11
.7%
15
.1%
17
.4%
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Ancillary Services
• Load and generation are
constantly changing, due to:
– Daily load patterns
– Instantaneous load variation
– Changes in variable
generation output
– Generators tripping offline
• Ancillary Services are procured
in the Day-Ahead Market to
ensure extra capacity is
available to address variability
that cannot be covered by the
five-minute energy market.
Ancillary Service Products
• Regulation Service
ERCOT sends a signal every four seconds
to increase or decrease output to the
generators providing Regulation.
• Responsive Reserve Service
Capacity from generators or load resources
that is readily available to respond to
frequency events
• Non-Spin Reserve Service
Capacity that can be started in 10 or 30
minutes to cover forecast errors or ramps
17
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Wind Generation Capacity – December 2018
18
• Steady growth continues, with some spikes.
• Largest annual increase: 3,294 MW in 2015
(A close second: 3,220 MW in 2008)
• Incentives, uncertainty and other factors affect
construction decisions and schedules.
• Not all planned projects will get built.
• Texas continues to lead U.S. in wind capacity.
Future outcomes uncertain
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Utility Scale Solar Generation Capacity – December 2018
19
Future outcomes uncertain
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CREZ Transmission
20
Source: Oncor
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Distributed Energy Resources
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Distributed Energy Resources
22
• Distributed Energy Resources (DERs) include solar photovoltaic (PV)
installations, small wind turbines, batteries, small generators, and
advanced demand response.
• Identify potential future impacts of DERs on ERCOT’s functions –
including but not limited to load forecasting, network modeling, real-
time grid operations, metering and settlement.
• Identify and, when possible, eliminate barriers to DER participation in
ERCOT markets, including developing ways for appropriate
wholesale market price signals to be delivered to DERs
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Examples of Distributed Energy Resources (DERs)
23
Capable of Providing:
– Backup (emergency) power
– Demand charge reduction (e.g., 4CP)
– Response to wholesale market prices
– ERCOT Emergency Response Service
– An offset to energy consumption
– Ancillary Services
Photos courtesy Acclaim Energy
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NPRR 917 pricing proposal
• NPRR 917 would extend applicable nodal pricing to SODGs and SOTGs
– This would provide incentives for behavior consistent with Nodal market design and the reliability needs of the ERCOT system
• In the Real-Time Market, a nodal price is calculated for each electrical bus in the system at every SCED run
– There are ~13,100 electrical buses in the system
• The NPRR would establish nodal pricing as follows:
– SODGs (distribution-connected generators) would be paid the time-weighted price created at the Load point (electrical bus) to which the unit is mapped, per NPRR 866
– SOTGs (transmission-connected generators), which are already fully modeled, would be paid the time-weighted price at the electrical bus determined by ERCOT in review of the meter location in the Model
• There are 4 SOTG units with a total of 35.5 MW on the system today
24
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Settlement Only DG in ERCOT 2010-2018
25
Accumulated
Count
0 MW
100 MW
200 MW
300 MW
400 MW
500 MW
600 MW
700 MW
800 MW
900 MW
0 Units
50 Units
100 Units
150 Units
200 Units
250 Units
Renewables
Non-renewables
Accumulated
Count
SODG formerly known as Registered DG
SODGs No. of Units MW
Non-Renewable 160 498
Renewable 55 320
TOTALS 215 818
73 units totaling 148 MW
added since 1/1/18
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Demand Charges
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Summer Weather Impacts on Load by Customer Type
• Customer class breakdown
is for competitive choice
areas; percentages are
extrapolated for municipals
and co-ops to achieve
region-wide estimate
• Large C&I are IDR Meter
Required (>700kW)
• 15-minute demand values
Thursday, July 19, 2018
5:00 p.m.
ERCOT Load: 73,539 MW
Temperature in Dallas: 108°
Thursday, March 1, 2018
5:00 p.m.
ERCOT Load: 37,997 MW
Temperature in Dallas: 62°
>35,000 MW of
weather-sensitive
load -- 48% of peak
Residential
48.8%
Small
Commercial
24.7%
Large
Commercial and
Industrial
26.4%
Residential
27.7%
Small Commercial
27.1%
Large
Commercial and
Industrial
45.2%
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Demand Charge Avoidance (4CP Response)
• The Four Coincident Peaks (4CP) in ERCOT are the highest system-wide
load 15-minute settlement intervals in each of the four summer months:
June, July, August, September
• These intervals are the basis of various Transmission & Distribution (T&D)
charges for:
– Non-Opt In Entities (municipally-
owned utilities and electric cooperatives),
at the boundary meter level
– Retail choice customers with
peak demand ≥700 kW (Interval
Data Recorder Meter required)
Combined, more than
47% of total ERCOT
load is subject to 4CP
charges
Chart represents percentages of load at
IE 1700 on June 27, 2018, ERCOT’s
all-time system peak at the time
“Large C&I” = IDR Required
Retail
choice
load
Residential
34.4%
Small Commercial
18.2%
Large C&I
20.3%
NOIE
27.0%
28
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Transmission Charge Increases
29
• Final 2019 postage stamp rate is $54.57 per 4CP kW
Most CREZ projects
came online 2013-2014
Major factors:
1. CREZ
2. Natural load
growth
3. Far West load
growth
Coming soon:
1. Freeport
Master
Project
2. Lubbock
Power & Light
Integration
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Advanced Metering & Retail DR
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Advanced Metering Origins
• 2005 Texas legislation enabled TDSPs to receive accelerated cost
recovery (via surcharge) for Advanced Metering Infrastructure (AMI)
• PUC rule implemented the law in 2007, with these purposes:
– Implement the legislation by authorizing the surcharge
– Increase the reliability of the regional electrical network
– Encourage dynamic pricing and demand response
– Improve the deployment and operation of generation, transmission and
distribution assets
– Provide more choices for electric customers
• Key elements of the rule:
– Applies to investor-owned TDSPs only (NOIEs not affected)
– AMI meters must measure consumption in 15-minute intervals
– Interval data shall be used in wholesale market settlement at the ESI ID
level
31
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15-Minute Metering
Pre-AMI AMI
Energy data points per month
Applies to residential premises without on-site distributed generation.
1 2,880
32
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Advanced Metering benefits
• >7 million advanced meters now active in the
competitive choice areas of ERCOT
– >99% of ERCOT Load is now settled on 15-
minute interval data
• includes AMI, competitive IDR, and
NOIE IDR
• TDSP benefits:
– Reduced meter-reading costs
– Advanced outage detection
– Faster switching and move-ins/move-outs
33
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Advanced Metering benefits
• Retail Electric Provider (REP) benefits:
– Settlement accuracy (no more load profiles; see next slide)
– Real money if customers reduce load during high-priced periods
• ISO benefits:
– Settlement timeliness & accuracy
• Customer benefits:
– Access to granular energy usage data
– A wider selection of REP products to choose from
34
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Why settlement is important
• In settlement, LSE purchases are reconciled with
generators’ sales
• Prior to the AMI implementation, REP obligations for
residential and small commercial customers were
based on Load Profiles
– Profiles are estimates of average individual usage, based
on statistical samples of data from ‘like’ customers
– A Profile for each customer type was created for each
Operating Day, using weather & other inputs
– Interval-level values were then assigned to each customer
according to their Profile type, scaled based on monthly
kWh usage
35
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Profile example
• A profile assumes customers of this type on average have the
profiled Load shape
– The load magnitude is adjusted (scaled) based on the
customer’s monthly kWh consumption
• Prior to AMI, REP Load was settled based on this estimate
Residential High Winter Ratio Profile Type for
North Central Weather Zone, July 23, 2018
36
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
kW
h
Hour
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Why settlement is important
• Settlement based on Load Profiles would be accurate at
the REP aggregate load level only if its customers were
not deviating from the profiled shapes
– REP must accept the settlement outcome even if its customers
were making significant changes to their load shapes
• In other words…
– Profiles are oblivious to intelligent load management
– Profiles are hard barriers to price elasticity of demand
– Profiles kill demand response
37
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Why settlement is important
• Settlement on actual 15-minute data
cures this problem
– When customers are settled on their
actual usage, the benefits of any action
taken to reduce Load during a period of
high wholesale prices will accrue directly
to the LSE
– This gives the LSE (in this case, the
REP) an incentive proportional to real
time prices to promote intelligent load
management and demand response for
its customers
38
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Retail Price/Demand Response
• If retail DR and price response penetration are a key metric in
measuring the success of the ERCOT retail market and the AMI
investment, how are we doing?
• Leveraging this rule language, ERCOT has worked with REPs since
2013 to collect data on various product offerings, including: – Time-of-Use
– Peak rebates
– Real-Time pricing
– Block & Index pricing
– Other load control products
• REPs take snapshots of their customer base on Sept. 30 each year
39
PUC Subst. R. 25.505 (e)(5)
Load serving entities (LSEs) shall provide ERCOT with complete
information on load response capabilities that are self-arranged or
pursuant to bilateral agreements between LSEs and their customers.
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Examples of Product Options
40
ERCOT Communications
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ERCOT Communication Channels
42
ERCOT website – www.ercot.com
• Today’s Outlook and grid conditions
• Daily and seasonal weather
• Market information, prices and more
Social media – join us!
• Twitter: @ERCOT_ISO
• Facebook: Electric Reliability Council
of Texas
• YouTube: ERCOTISO
ERCOT mobile app
• Real-time updates
• Wholesale pricing
• Information sharing
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Questions?
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